A resolution adopted unanimously by the National Assembly on March 4 makes an interesting reading of how our legislators get to grips with grave issues such as drug prices that keep rising continually.
The resolution, whose implementation is not mandatory, urges the Jamali government to take steps to bring down the prices and, if necessary, “force” the drug multinationals to fix the prices of their products closer to those that prevail in the neighbouring countries such as India and Iran. It also seeks introduction of medicines by their generic names so as to effect a drastic reduction in the prices and make them affordable to the common man.
The way Islamabad has been asked to take remedial measures (bring down the prices) shows the lawmakers are convinced the government can intervene and do so by a fiat. The health minister was, however, quick to make it clear that the government cannot “force” the multinationals to lower their prices. At the most, they can be persuaded to do so.
The MNA who moved the resolution cited the case of an injection which is used to manage a heart attack, to explain how high the drug prices were. Its price in government-run hospitals, he wondered, was Rs1,700 but is sold at Rs5,500 in the open market. He could not appreciate the gap between the prices determined by the market and the ones fixed by the government in its hospitals and thought this gap could be closed by a notification issued by the government, just as the prices of the land plots allotted to the MNAs can be greatly reduced through a government order.
It seems that the resolution was a mere ritual to express opposition members’ sympathy for the hard-pressed common folks or to pressure the drug companies for reasons only known to them or to simply embarrass the newly-inducted government which has a slim majority in the house.
The prices of medicines continue to go up for certain reasons that are both within and beyond the control of the state authorities. Some of these are as follows:
(1) In Pakistan, price control regime has never worked. Equally ineffective has been various provisions of the Drug Act, 1976. Each successive government had devised its own formula to determine the price or its revision when applications are received from the companies. Had the price control regime been rational and transparent and not frequently tempered with, the medicines would not have been so costly as they are now.
(2) Although there does exist a procedure to seek a revision of drug prices, both foreign and local companies pay heavy bribes to the bureaucrats and the key lawmakers (when a parliament is in existence) to get a desired raise in the prices of their products, particularly the ones which are vital to the management of major diseases such as cancer, AIDS, diabetes, heart ailments, arthritis, liver,kidney diseases, etc. Ten years ago, a health minister of a party now in opposition was able to make a fortune from this corrupt practice by restricting the process of decision-making to his person. The ministry of health is, hence, a lucrative entity.
The question who should have a monopoly over the bribe money or should it be shared with other influence-peddlers had led to a bitter clash between the ministries of health and industries in the pre-election days last year. Hence, the abnormal rise in prices of medicines which includes the cost of bribery and which the MNAs seek to contain through governmental intervention has its reasons in the continuity of this age-old practice that refuses to fade away.
(3) A major reason why the federal government cannot influence or interfere in the drug market is two-fold. There does not exist a public sector in the pharmaceutical industry, nor was it ever deemed necessary to have one. It’s a private sector’s market in toto. Absence of public sector, which could have competed with the multinationals, deprives Islamabad of having a say in the proceedings of the market. Secondly, the drug companies, including the multinationals which market the modern, effective, quality and needed medicines and charge too high prices, cannot be tamed, dictated, coerced or simply wished away. It’s they which cater to our vital needs and it’s their terms on which they will stay in our country.
Compared to this state of affairs, India has a robust public sector which controls about 30 per cent share of the market. And its public sector and local companies are capable of competing with the multinationals and influencing the price structure. Under Patent Act, 1970, India introduced a shorter patent regime and a stringent compulsory licensing rules which enabled its companies opt for production of medicines by generic names.
As a result, today India has one of the world’s biggest generics industries (others being Brazil, Argentina and Thailand) and is also a leading exporter of generic medicines, including AIDS drugs to Africa. Compulsory licensing allows a country to make copies of patented products without the patent-holders’ explicit consent. It is already permitted under TRIPS, subject to certain conditions.
(4) The pharmaceutical companies are pro-profit concerns and do not exist for humanitarian purposes or noble objectives even though their products save lives and prevent unnecessary deaths. And there are no moral limits in seeking profits; much more is still much less.
The drug multinationals seek much higher prices for their patent products because they claim “transfer prices” on them — meaning since the company incurred a huge amount of money on the research of these products, therefore this cost has to be recovered by including it in the normal price. As a matter of principle, this is deemed to be fair and justified. But what is deemed to be unjustified is the wrong calculation of the transfer price by the company which it gets approved by paying bribe. So, the actual price is fixed too high.
Besides, the multinationals import most of the ingredients from their parent companies, also on higher cost, on the pretext of quality assurance. It adds to the ultimate price. Even when the patent period expires, the high price remains intact and, in fact, becomes higher. Hence, the question of the prices coming down, even after research cost is paid back, does not arise. Only local companies sell the same drug (with their own brand names) on lower prices.
(5) Pakistan’s Patent Ordinance, 2000, which incorporated essential provisions of the WTO-TRIPS agreement, is a strong law in respect of protecting the patents and not in the interest of the country and its citizens. The military regime, while promulgating this ordinance, was too willing to accept the WTO dictates and too inclined to promote the interests of the multinationals and hence it extended what is called TRIPS plus provisions. The ordinance is a major setback to the poor people because by granting monopoly rights to patent holders it allows them to charge higher prices.
The ordinance does not contain what is called ‘Bolar Exception’ provision which is present in patent laws of the US, Canada, Australia, Israel and Argentina. This provision is crucial to allow marketing of generic drugs as soon as the patent expires. The absence of Bolar Exception enables the patent holder to extend the monopoly rights even after the patent’s expiry. Greater access to generic drugs is the key to lowering prices in poor countries by creating more competition. For example, a year’s cost of patented drugs to treat AIDS is about $10,000 in America, but generic drugs cost comes roughly to about 200 dollars.
(7) International climate which had begun developing in favour of cheaper medicines to the people after Doha moot has again turned against them following recent breakdown of WTO talks in Geneva where US Vice-President Dick Cheney personally intervened to block a global deal that would have heralded a new era, promising a greater relief to AIDS patients in Africa in particular. About 140 members of the WTO had favoured the deal under which global patent laws could be relaxed. The United States was the key opponent, acting on behalf of the corporate pharmaceutical sector.The Doha Declaration had a proviso which gave right to developing countries to bypass the patent laws and have access to generic drugs in certain conditions. Now, the Doha accord has apparently lost its substance. The joke that went round that morning (when the US opposed the deal) was that “they couldn’t make a decision because the CEOs of Merck and Pfizer were still in bed.”